- The first is its geography. The harbour is a giant wall through a big part of the city, with only a few chokepoints where people can cross. These are congested, and constrain the entire road and rail transportation network. The Pacific ocean constrains growth to the east, the blue mountains to the West, and the national park to the south. The only growth corridors are towards the southwest, and northwest - a long, long way from the CBD.
- It's not nearly dense enough. Australians love their free-standing houses, both the McMansions in the new suburbs, and the trendy terraces in the inner city, beloved by Baby Boomers who have a convenient lifestyle while living in an "urban village" - of course, they all bought back in the 90s when it was still affordable. These two types of housing make it incredibly inefficient to build a workable rail public transport network, so a lot of the PT is forced to use busses, which are not as popular, and suffer from the same congestion at the chokepoints as well as the additional car traffic from everyone who isn't well-served by PT. This is a lot of people.
- Any attempts to build higher density housing, particularly in the sainted inner suburbs will be met with cries of "Over-development", even by people who should know better such as the Greens.
I moved to Berlin a few years ago, and it's a comparable city in size to Sydney (3.5m vs around 5m in Sydney). It works far better because it's far denser, and the level of infrastructure provided makes living here a breeze by comparison. Berlin came of age before the motor car, and was geographically constrained for quite a period there by an actual wall. Sydney really started to grow just as the car become popular and widely-owned.